Business as Usual and Prosecution of Financial Crime

The latest fallout in the banks manipulating the LIBOR scandal were criminal charges against two UBS traders. LIBOR is a key financial rate and the Justice Department this week fined UBS $1.5 billion for rate rigging. The Japan UBS subsidiary also pleaded guilty to wire fraud.

UBS Securities Japan Co. Ltd. (UBS Japan), an investment bank, financial advisory securities firm and wholly-owned subsidiary of UBS AG, has agreed to plead guilty to felony wire fraud and admit its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, Attorney General Eric Holder announced today. The criminal information, filed today in U.S. District Court in the District of Connecticut, charges UBS Japan with one count of engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating LIBOR benchmark interest rates.

As part of the ongoing criminal investigation by the Criminal and Antitrust Divisions of the Justice Department and the FBI into LIBOR manipulation, two former senior UBS traders also are charged. Tom Alexander William Hayes, 33, of England, and Roger Darin, 41, of Switzerland, were both charged with conspiracy in a criminal complaint unsealed in Manhattan federal court earlier today. Hayes is also charged with wire fraud, based on the same scheme, and a price fixing violation arising from his collusive activity with another bank to manipulate LIBOR benchmark rates.

Notice what was not done in the case. The UBS charter was not revoked even though manipulating the LIBOR was widespread throughout the firm.

The Justice Department’s decision stops short of imperiling the broader financial system because it shields UBS’s parent company from losing its charter, among other major repercussions. But by securing a guilty plea against a subsidiary, the department has shown that it is willing to punish severely one of the world’s most powerful banks. It was the first guilty plea from a major financial institution since Drexel Burnham Lambert admitted to six counts of fraud in 1989.

In other words, while we have some criminal prosecutions, it's a token in comparison to the damage. U.S. state and local governments have losses estimated to be $10 billion due to rate rigging. Fannie Mae and Freddie Mac has an estimated $3 billion loss due to LIBOR manipulations.

Fannie Mae and Freddie Mac may have lost more than $3 billion tied to the rigging of a key interest rate, according to internal memos by the auditor of the Federal Housing Finance Agency.

The level of losses are so vast, the damage so great, once again a record setting $1.5 billion fine becomes chump change, a pay to play fee in light of the massive losses from regular folk with the billions in profits made by banks. Earlier we had another pay to play fine for HSBC's money laundering.

The outrage over HSBC getting a slap on the wrist for money laundering was universal. Matt Taibbi called the settlement a joke. Senators took to coining the phrase Too Big To Jail to express their outrage. The lack of real criminal prosecutions against the big banks is becoming a pattern too glaringly obvious. Too big to fail has turned into too big to jail and we have one system of justice for regulator people and another for large corporations, especially banks.

In a sharply-worded letter to Attorney General Eric Holder, Merkley criticized the government’s recent agreement with British bank HSBC, which brazenly facilitated the laundering of $800 million in illicit narcotics proceeds that drug traffickers ran through the bank’s Mexican and American affiliates, and engaged in over $600 million in transactions that violated U.S. sanctions against Cuba, Iran, Libya, Sudan, and Burma.

“I am deeply concerned that four years after the financial crisis, the Department appears to have firmly set the precedent that no bank, bank employee, or bank executive can be prosecuted even for serious criminal actions if that bank is a large, systemically important financial institution,” wrote Merkley. “This ‘too big to jail’ approach to law enforcement, which deeply offends the public’s sense of justice, effectively vitiates the law as written by Congress. Had Congress wished to declare that violations of money laundering, terrorist financing, fraud, and a number of other illicit financial actions would only constitute civil violations, it could have done so. It did not.”

It isn't just a few Democrats piping up, GOP Senator Chuck Grassley is outraged and explains why in the below interview along with Neil Barofsky.

Officials of the Administration have argued with some basis that instituting criminal proceedings against financial institutions can be destabilizing, and have instead opted for civil proceedings against acknowledged violators of laws that are important for the maintenance of the stability and integrity of our financial system.

But these constraints do not apply to prosecution of the individuals who have perpetrated these acts, and this should be vigorously pursued. From the standpoint of deterrence, prosecuting individuals is preferable as this raises few if any questions about institutional stability.

To this day there is still major at least negligent acts by banks being kept secret by the SEC and the above interview implies the Treasury department is complicit in not prosecuting the big banks over such egregious violations of the law.

Seems the Justice Department is cracking just a tad under pressure to explain the sudden criminal charges against two UBS traders. Yet unless Senators keep up the pressure as well as the public, odds are this will be the token prosecution of individuals beyond the rogue trader or scam artist who has no effect on a large corporate institution.

Comments

UBS AG is considered a "heavy hitter" by opensecrets because it is one of the 140 biggest donors to federal elections since the 1990 election cycle (despite it being a Swiss corporation). In 2012, it has donated over $450,000 thus far. Why should our politicians limit their money grabbing/taking from US corporations only? Isn't that unfair? Open borders and international trade of course apply to foreign corporations too, justice demands it.

VIOLATING SANCTIONS IN 2006
Anyway, just to show UBS doesn't limit itself to LIBOR rigging and is not a recent criminal, sorry, non-compliance corporation, here are just two stories from many. The first is from 2006. UBS was violating sanctions again Iran, Iraq, Libya, and Cuba. UBS settled for $100 million back then and had no problem continuing to do business here and abroad, and lobbying and renting our politicians despite its violations and fine.http://www.telegraph.co.uk/finance/2935936/UBS-help-for-Iran-broke-US-sa...

That article also mentions UBS helping clients evade taxes in the US and Germany.
The crimes continue, the lobbying continues, the bankster payrolls and outrageous fortune continues. Average global citizen, if you laundered money or broke sanctions against declared terrorist sponsors, could you continue doing business the very same day and the next? Could you avoid spending any time in jail? Could you still meet regularly with your own politicians and politicians across the globe to get what you wanted? Try writing to a Congressman outside your district, their system automatically prevents you from emailing them with your concerns as an American. But if you are a foreign bank, you have more access and power over a US politician than a law-abiding citizen? That's just one symptom of how ridiculous the situation has become. Why should we obey laws when foreign corporations can break them year-after-year and get richer for it? Why should we listen to politicians that openly and readily accept money from criminal organizations? All of this information is readily available to a 5 year old through the Internet, so the politicians could know everything about UBS if they cared - they don't. They want that $ at all costs and UBS and other criminal organizations will give it to them (and pass the cost on to customers).

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Supposedly it is illegal for foreign nations and entities to influence Congress which is obviously ignored. Remember when Al Gore got into huge trouble for foreign campaign contributions from China? Yet India routinely contributes by going through those with naturalized citizenship and if one is a corporation as you point out, it's open season on American politics.

HSBC and UBS have violation after violation as you point out, so a couple of traders getting the book thrown at them sure looks like the token employee sacrifice.

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It's a simple question, if so-called American politicians don't serve the majority of the electorate, and, in fact, serve foreign interests, what exactly are they? Yes, it's that simple. If an elected official serves those who didn't elect him, but rather foreign and domestic interests that merely fund his/her professional and personal bank accounts, help him/her family, employ him/her as a lobbyists before and after "public service" (ha ha ha!), what exactly are they? Let's be blunt, because we're far beyond the point of niceties and subtleties. We are looking at 1920s and 1930s Europe now, globally. Massive unemployment and massive inflation (disguised purposely as it may be by central bankers and pols). If someone in my country enjoys the freedoms and protections millions of fellow Americans fought and died for, takes my money through taxes, but serves 1% of domestic interests and openly serves foreign interests, what is he? What would Teddy Roosevelt call him? Washington? Truman (Democrat) or Eisenhower (Republican)? You see, those who served and made tough, brutal choices never sold out their country. Eisenhower warned us well of the dangers ahead and Truman risked it all in the artillery and was facing poverty even after being President (how different today's politicians are - and wealthier and lacking in integrity). The Founding Fathers? What is that person really? Is he a patriot? Is he my friend and someone I can rely on through thick and thin? Is he helping me and my neighbors in these dark days? Can I even trust him or her to watch out for me and my country? How much abuse does one have to take before the answer becomes obvious.

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Seriously, if your job is to seek justice, you have mountains and mountains of evidence (emails, corporate records like minutes of meetings, etc.), thousands of witnesses across the globe (including many people who would love to burn their former employers), and civil admission after civil admission, you really have to work hard to turn a blind eye to all of these crimes completely laid out for you. Remember, the feds have laws locals would love to have, like lying to a federal agent, mail and wire fraud, etc. One lie to a fed and they always jack up charges - basically it's a lazy man's way of prosecuting a case if actual work is too hard. But yet, nothing, nothing, nothing. And all the local DAs and AGs, I'd be crazy pissed off and would expect to be bombarded by irate farmers and other customers that lost their $. Anyone with a farmer or other customer that got ripped by Corzine and Dimon has jurisdiction over the case, the feds never have and never will have exclusive jurisdiction because states and feds can go full force in their own criminal courts, the two don't preempt each other and have separate laws, rules of evidence, sentences, corrections, etc. So it's especially shocking, knowing full well the feds would protect federal corruption and the bagmen like Corzine/MFUGlobal, state AGs and county prosecutors wouldn't go after him criminally to show nobody screws with my local voters/victims. Pretty amazing, people look for work and these people have jobs to criminally prosecute people + organizations and they have yet to do it. Again, what the Hell are they paid for, why are they in jobs at GS-10-15 (and even Senior Executive Service), and why aren't they fired from top down because in these dark days, taxpayers don't need to fund people that apparently have no interest in even pretending to do their jobs, lest they piss off their future and/or past employers.

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This was an interesting article (of many covering the Indian protests over a brutal rape and failure to act). Although talking about a sexual assault and the Indian politicians failure to show real concern, the language could be applicable to many countries, including the USA, about the mentality of rulers vs. rules, the failure to identify with the average person, and feudal democracy. The same language could be used for any number of issues and any number of countries. The concept of different rules and laws and means of getting ahead for the elite and the rest of us really do carry over in so many areas. When the elite are victims of crimes, perpetrators, or want laws to cater to them, how are they treated? Are they perpetually ignored and never given an audience with anyone who is supposed to represent them? In fact, don't they get special audiences with people and groups that aren't even supposed to represent them? And when the non-elite, vast majority of people in democracies (and non-democracies) are victims of crimes, perpetrators, or want laws to merely protect them or to give them a shot, how are they treated? The same goes for finding jobs, keeping jobs, and making a living wage. Especially in a democracy, if the people don't have a voice and are purposely ignored, what exactly are they supposed to do? That's not exactly a democracy/republic anymore.

Parallels are all around everywhere, the elite that ignore them and think PRC is somehow better (despite being crony Communist), or India is better and the US needs to learn from India, or countries in Central America and South America are paradise, or the US is perfect and our politicians are angels that really do care about us between lining their own pockets at country clubs are only fooling themselves. Merely because are jobs are being sent overseas by plutocrats and politicians doesn't mean anything about those countries other than they are willing to work for much less until someone else can replace them.

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This is off-topic really for EP, but since you brought it up, military women are getting raped as routine and worse, not only does nothing happen, they are the ones who suffer professionally and financially on top of such a brutal crime against them. It's unreal and nothing changes even though their have been "Congressional hearings" and "Promises". At least India got out and protested.

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Guess who's blessing all of us with his smirking mug on Forbes (granted, a useless rag for that idiot beneficiary of nepotism - Steve Forbes)? Why, it's Mr. Charles Koch. Sure, it's a month old, but still his face is scaring children at public libraries - I guess they have to keep it for archival purposes. I didn't dare give myself an ulcer by reading through the fawning piece (I'll assume), but I've got to assume the interview didn't ask the plutocratic criminal how come he fancies himself a representative of American freedom and liberty when his daddy made those big bucks helping Stalin develop his infrastructure while Stalin was killing all sorts of people in the 1930s on. How many Ukrainians, Russians, Poles, Jews, Germans, Chechnyans, Kazakhs, Finns, etc. were tortured, deported, and/or killed whileDaddy Koch could pretend to be a patriot, trade with Stalin, and then have his sons repeat the same charade? I'll assume the article didn't dig into Koch boys trading with Iran, a US-government denoted terrorist sponsor that would get Average American locked up in a federal pen. Koch, patriot, fawning articles? Just another symptom of double standards at every level and in ever sector of the globe nowadays, especially here.

And of course the Prez is on Rolling Stone (I think this is #50,000 as far as articles or awards given to him). For a man that hasn't really helped the 99% or taken on bankster criminals, he sure does get praised like he cares. Time to have a "beer summit," but no time to rebuild the American middle class or have the DOJ indict 10,000 bankster and other corporate criminals? Really? Oh well, he'll be so much richer when he joins a foundation after 2016 or gives speeches to his former fundraisers at $300,000 a speech like old Bill C.

And in case you wanted to read The Atlantic, it's got Mr. Big Soda is Bad Bloomberg on its cover talking about his bold decisions and how he's a brave thinker. Damn, the media is in full grovel mode. Sure, Bloomberg hates personal freedom, sends police outside his own state to stir up trouble when he should concentrate on running the biggest city in the US. Sure, he protects banksters that launder money for terrorists but never criticizes them and bashes protesters exercising their First Amendment rights and police that mace them in the face. Sure, he wanted to run the NYC Marathon while bodies were literally washing ashore and people were (and are) homeless and struggle to house themselves and their kids months after Sandy. And he's working with Murdoch in that bogus "think tank" to import more visa workers. But he's given an article to force his advice on us? But hey, plutocrats and the corrupt run everything today. The elites run everything. If they get caught or ever get called out for all the crap we never could pull, it's an absolute different set of standards. From gun laws (try getting a handgun permit in NYC if you are an average citizen vs. a politician or celebrity - it's a joke in double standards and strict liability for the Average Joe vs. do no wrong for power players) to crimes to media coverage. We are the great, idiotic unwashed masses that have no clue how to walk and talk and need to be locked up indefinitely for voicing dissent or mowing a law too early, but the big banksters, big politicians, and big media puppets can break all the laws they want, get paid handsomely to do it, step on us at every turn, and still get praised like they do nothing wrong on TV screens and in the papers. So, again, why have any faith in this system? The people running the show have utter contempt for democracy and us.

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I don't get bogged down with the whole D vs. R, "liberal vs. conservative," Communist vs. Capitalist label stuff. It's all a puppet play. These people worship themselves and the $ (or Yuan or Yen or Euro). They don't stick to labels, values, or consistent ideas, so why should we? They all worship profit above all else, their own egos, and anything else they want or like. Bloomberg was a Democrat, until he wanted to be Mayor, so he switched to R, then he became "independent." See how easy that was for him. Koch is a capitalist patriot, unless there's $ to be made, then he'll support Uncle Joe. His kids love America and Fox News, unless Iran can make them money (and there's a whole lot of money to be made if you can break sanctions, basically you own a monopoly because everyone else seems to value laws - too bad for them). So they love freedom of religion and US troops, unless the Mullahs can make them money, and then they'll support the Mullahs and those who attack our military. See? Easy enough for those without integrity. And it goes on and on. Nazis are bad, unless those same Nazi know how to build rockets or can hunt Communists, then they aren't apparently so bad and could come here post-WWII. Contracts must be enforced, unless of course the powers that be don't want them enforced. Freedom of the press is critical and competition is critical, unless a recent immigrant wants to consolidate the press and squelch debate and criticism. Media figures love the 1st Amendment, but the 2nd Amendment many of them despise. Those with compassion coming out of their eyes will get super pissed if the guy that keyed their car is never arrested and put in jail. If the same big people get pulled over for speeding, oh man, the cop must be reprimanded and fired or else. If someone uses drugs, he must be lazy and an addict. If the powerful person whining about lazy addicts is busted, it must be political witch hunts.

It's all hypocrisy and double standards all around on every side. It goes on and on. If there's money to be made these people will call themselves whatever it takes to make that cash. They'll also be more than willing to sacrifice anyone and everything for that extra dollar.

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Behind every political label is a whole lot of corporate money and a whole lot of spin. I agree with you and why EP tries to be reality based since politicians are so busy with their lobbyist pals, they don't pay much attention to regular folk in reality and very much in spite of the rhetoric. Although these days Congress seems more crazy than in the past.

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